Hedge funds have a popular reputation for being willing to take risks, but this image was dented last month by figures published for the first time by the Financial Services Authority.

The UK regulator showed that, among other things, hedge fund managers are keeping twice as much collateral with their prime brokers to cover leveraged positions as their bankers asked of them.

The results of a survey of the 50 largest UK hedge fund managers as of last October showed there was a cushion of assets that managers could rely on before they need to post additional margin with their lending banks. So, for every $100 of margin that their banks requested, the hedge funds were on average handing the bank $200.

Stuart Gordon, a UK investment consultant who advises clients on hedge fund investments, said: “I am astonished: no one puts up more margin than they have to, it doesn’t make them any money. It won’t cost them a lot, however, and perhaps they are being cautious, or maybe it’s because of a sort of moral pressure from the prime brokers.”

A prime broker at a large London bank said that most of its clients ran a large excess of collateral. He said: “Most of the time we’re prepared to lend them more money than they’re prepared to spend.”

Ash Gulati, a senior adviser at law firm Akin Gump, said the FSA’s data suggested hedge funds were using less leverage. He said: “That collateral requirements are higher now than in the past, while the percentage of excess collateral is more in line with historical levels, is consistent with hedge fund leverage having broadly fallen.”

While hedge funds may be pulling back investment risk by reducing leverage, they are actually taking on greater counterparty risk, according to Gulati. He said: “The data indicates that, per dollar of net equity, hedge funds are leaving more excess collateral with their prime brokers. These risks can be mitigated by careful negotiation of prime brokers’ rights of rehypothecation and certain other terms.”

The survey also found that banks’ average margin requirement for hedge funds was 38% – in other words, if a hedge fund borrows an asset from a bank, the lender requires the fund to give it collateral equal to 38% of the value of the asset.

This is lower than it was in April last year, but higher than at any other time since the FSA’s counterparties survey began in April 2005.